Avoiding Medicare’s Big Hole

Saturday

In order to cope with the big financial gap in Medicare’s prescription drug coverage, older Americans are increasingly turning to low-cost generic medications.

The Medicare doughnut hole is the federal provision that older Americans love to hate.

And that is not expected to change next year, when the doughnut hole — the nickname for a big financial gap in each person’s Medicare prescription drug coverage — gets slightly larger. If the past is a guide, many people will struggle to secure a full year’s supply of the drugs they need.

But despite the arrangement’s unpopularity with older consumers, some experts see a positive public policy trend when they peer into the doughnut hole. Because it potentially forces a Medicare enrollee to pay more than $3,000 from his or her own pocket during the gap period, the hole is helping curb growth in the nation’s drug spending by pushing people toward low-cost generic drugs.

And because the cheaper generics generally work just as well, patients are incorporating them into their permanent drug regimen, according to Dr. Tim Anderson, a pharmaceuticals analyst for Sanford C. Bernstein & Company, who is also a physician.

“Clearly, once you’re on the therapy, if you’re tolerating it and you’re saving money, there’s no reason to switch back,” he said.

It may not be a message that brand-name drug makers want to hear. But with the Medicare Part D drug program enrollment period now under way, through Dec. 31, analysts predict millions of older Americans will study generic drug prices and options as they select an insurance plan. Some economists say that many Medicare enrollees, through carefully planned use of generics, can avoid reaching the doughnut hole altogether.

When the Medicare Part D program began in January 2006, makers of name-brand drugs considered it a welcome stimulus to overall use of prescription drugs. The industry knew the doughnut hole might steer some patients toward generic drugs, but not necessarily so soon.

“I don’t think they anticipated how quickly this kind of event could shift patients toward utilizing generics,” said Peter C. Demogenes, a senior director of the research firm Wolters Kluwer.

Congress carved the doughnut hole into the Medicare prescription drug plan as a way to limit the federal outlay. But architects of the plan made sure some costs were covered for all Medicare beneficiaries upfront, while also seeing to it that the sickest would get help with catastrophic drug costs on the far side of the doughnut hole. Once a beneficiary has made it through the coverage gap in any given year — in 2008, after the total cost of drugs has reached $5,726 — prescriptions are generally covered at 95 percent.

About 4.2 million people reached the gap last year, according to a Wolters Kluwer study, and many of them switched to generics as a way to keep their out-of-pocket costs low. Others started using generic drugs even before they reached the doughnut hole to avoid the higher co-payments their policies charged for brand-name drugs.

In 2006, an estimated 59.6 percent of the Part D prescriptions were filled by generic drugs. By the first quarter of 2007, the most recent period for which data are available, the generic rate in Medicare had edged higher, to 61.5 percent, according to Medicare figures.

Billy Tauzin, the president of Pharmaceutical Research and Manufacturers of America, the trade association for brand-name drug companies, said it was clear that the Medicare program, including the doughnut hole, was helping drive the use of generic drugs. And the popularity of generic drugs is cutting into the profit margins of branded drug companies, he added.

Mr. Tauzin, a former congressman, said his group had made several proposals to Congress for shrinking the doughnut hole. Among the suggestions, he said, was to count the free drugs that companies sometimes provide to lower-income Medicare beneficiaries as part of the patients’ running total of drug costs. Doing so would make their catastrophic coverage kick in sooner.

“We can help them, but it doesn’t count toward getting them out of the doughnut hole,” Mr. Tauzin said. “That’s not fair.”

Kerry N. Weems, the acting Medicare administrator, said the doughnut hole was not the only reason that generics were on the rise. The Part D program over all has made consumers more price-conscious, he said, noting that Medicare’s Web site lists the prices of pharmaceuticals dispensed at each drugstore participating in a particular Medicare plan. “It will show you month by month for the entire year what your yearly expenditures are,” he said.

In 2008, the gap in the standard Medicare drug benefit begins when a patient’s total drug costs have reached $2,510, including the portion paid by Medicare and the patient’s own out-of-pocket deductibles and co-payments. The beneficiary must then absorb 100 percent of costs out of pocket for the next $3,216, until total drug costs have reached $5,726. Only then does the catastrophic coverage kick in.

While federal assistance is available to help the poorest patients with premiums, deductibles and co-pays under the Medicare program, those who fall just above the poverty guidelines and cannot get extra help sometimes simply stop taking their medications once they reach the doughnut hole or rack up big credit card debt to pay for them.

Debbie Mullaney, the pharmaceutical coordinator for a community health clinic in Cumberland, Md., said her clinic looked for ways to help such patients get their medications.

When people reach the doughnut hole, she said, they must continue to pay their monthly Part D insurance premiums — typically $30 or so — even as they also pay for their medicines out of pocket. During that period, the clinic tries to help patients switch to generics or supplies them with free samples from brand-name drug companies.

“We always try steps to get them on something they can afford and get them some accessibility,” Ms. Mullaney said.

A recent AARP survey found that among Medicare beneficiaries who reached the doughnut hole, 15 percent decided not to fill a prescription.

Dr. James D. King, a family physician in Selmer, Tenn., estimates that 50 to 70 percent of his Medicare patients hit the doughnut hole — at which point they switch to generics, ask for free samples or simply stop taking their medicine.

In some cases, Dr. King said, patients elect to switch to another type of drug altogether to reduce costs. For example, patients taking Benicar, a blood-pressure treatment that is not available as a generic, may switch to lisinopril, a generic that also lowers blood pressure but sometimes causes the side effect of coughing.

Another example he cited is that patients taking Plavix, a brand-name blood thinner, might simply use aspirin, a blood thinner that is not as effective but is much cheaper. “It’s not unusual to have a patient who is taking anywhere from 7 to 13 medications every day,” said Dr. King, who is president of the American Academy of Family Physicians. “We start to look at which ones you absolutely need to be on and which ones you don’t.”

Lillian Russell, 86, a widow from Hummelstown, Pa., takes eight prescription drugs. Even though five of them are generic, she reached the doughnut hole this year in July. Her prescription drug bill in September, which she paid entirely on her own, was $727.91. Mrs. Russell believes she will remain in the gap for the rest of the year.

“Unfortunately, two of the drugs I have been on are fairly new ones and are very expensive and there is no generic for them,” Mrs. Russell said. Though generics are not always an option, some economists say that with proper planning, some patients who entered the doughnut hole this year could have avoided it.

A study by Express Scripts, the pharmaceutical benefit manager, said that an analysis of 220,000 patients found that 23 percent of those who fell into the doughnut hole in 2006 could have skirted it by using generics to cut drug costs. Such planning, though, requires that patients talk to doctors about their finances. Many people are embarrassed to bring up money when discussing prescription drugs with their doctors, and many physicians never broach the subject with patients.

A study of more than 1,100 patients published by The Journal of the American Geriatrics Society found that four of five wanted doctors to discuss medication costs, but fewer than one in five doctors did. One in three patients in the study who cut back on their drugs because of cost said they had never asked their doctor for help in reducing expenses.

Dr. Ted D. Epperly, a physician in Boise, Idaho, and president-elect of the American Academy of Family Physicians, said that patients were sometimes embarrassed to discuss their finances.

“Usually I’m a little blind to it if they’re in the doughnut hole,” Dr. Epperly said, “mainly because they’re proud people, and they feel their obligation isn’t to share that with the doctor.”

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